Research

Publication Date: 2 February 2010 ID Number: G00172527

Top Six Supply Chain Execution Processes, 2009 to

2014
C. Dwight Klappich

We highlight the top emerging supply chain execution (SCE) processes for supply chain
organizations to consider automating. Use this research as you plan your supply chain
management (SCM) investment strategies for the next five years.

Key Findings
SCM organizations remain under heavy pressure to reduce costs and improve
productivity, and this is leading to a renewed focus on improving SCE processes.

Because SCE supports other end-to-end processes, leading SCM organizations are
focusing on better aligning SCE with end-to-end processes.

SCE convergence demands new skills for composing processes that historically have
resided in functional silos.

Recommendations
Move away from siloed SCE processes, focusing instead on developing new processes
that align better with high-level, end-to-end supply chain business processes.

Develop an end-to-end process view with an eye to the extended supply chain, and pay
particular attention to designing multienterprise processes and performance
management.

SCM organizations should work with their IT organizations to prioritize the SCE
processes that will deliver competitive advantages through automation, and they should
build a joint road map for process automation, linking these two plans to the overall
supply chain and business strategies.

© 2010 Gartner, Inc. and/or its Affiliates. All Rights Reserved. Reproduction and distribution of this publication in any form
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TABLE OF CONTENTS

Analysis ....................................................................................................................................... 3
1.0 Top Processes in Supply Chain Execution ................................................................. 4
1.1 Multimodal Transportation Management as a Global Shared Service ............. 4
1.2 Inbound Delivery Management ...................................................................... 4
1.3 Flow Management ......................................................................................... 5
1.4 Labor/Resource Management........................................................................ 5
1.5 GTM .............................................................................................................. 6
1.6 Returns Management/Reverse Logistics ........................................................ 6
Recommended Reading ............................................................................................................... 7

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ANALYSIS
SCM organizations remain under renewed pressure to focus on the three core principles of SCM:

Minimize cost.

Maximize customer service.

Optimize operational effectiveness.
The economic downturn placed particularly strong emphasis on near-term cost containment, and
on operational efficiency and productivity. However, as SCM organizations begin to anticipate a
return to growth, most recognize that they do not have the luxury of myopically focusing on these
two near-term priorities. These issues must be addressed along with a holistic approach to the
role of the supply chain in business operations, preferably with no impact on customer
satisfaction.
SCE is a subset of SCM, focused on execution-oriented activities and specific applications,
including warehouse management systems (WMSs), transportation management systems
(TMSs) and global trade management (GTM). Sometimes, order management systems are also
included in SCE, but Gartner does not generally include order management in its definition of
SCE.
SCE is not an end-to-end process in its own right, but is instead a set of processes and activities
that support the three main end-to-end processes that comprise the "lion's share" of SCM:

Order to cash (sell)

Source to settle (buy)

Requirement to resource (make)
As the global economy begins to turn around, companies need to focus on the processes that will
help them return to growth. Undeniably, the six processes outlined below are important, but there
is a notable need for supply chain organizations to also focus attention on end-to-end processes,
or what Gartner refers to as "SCE convergence" (see "Supply Chain Execution Convergence:
Delivering on the End-to-End Process Promise"). SCE convergence refers to the need for supply
chain organizations to do a better job orchestrating and synchronizing processes, subprocesses,
and activities across functional application domains, such as order, warehouse and transportation
management, many of which are already installed in organizations. SCM organizations have to
break down the functional and application silos that preclude them from building effective end-to-
end processes. SCM organizations also must recognize that future competitive advantages will
come from process agility, and that they need to have the right application foundation built on
service-oriented architecture (SOA) and model-driven application principles, coupled with strong
competence in process composition. The notion of SCE convergence should become part of the
fabric of organizations' SCE application strategies, and should become a guiding principle in
future application selections.
The role and perceived importance of SCE is strategically changing, as leading organizations
recognize the need to better orchestrate, synchronize and control their end-to-end SCM
processes. Reclassifying and subsequently automating key SCE processes will ensure that SCM
organizations achieve competitive advantages during the next five years. Not all the processes
will be relevant, important or have the same level of value for each SCM organization. SCM
organizations should work with their IT organizations to prioritize the SCE processes that will

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© 2010 Gartner, Inc. and/or its Affiliates. All Rights Reserved.
deliver competitive advantages through automation, and they should build a joint road map for
process automation, linking these two plans to the overall supply chain and business strategies.

1.0 Top Processes in Supply Chain Execution

1.1 Multimodal Transportation Management as a Global Shared Service
Traditionally, TMS processes were focused operationally on specific areas — inbound,
intercompany or outbound freight — and were limited to one line of business (LOB) or geography.
Therefore, they were very fragmented across an organization. For example, a company might
have outbound shipping supported by logistics, inbound transportation supported by
procurement, and factory-to-warehouse shipments supported by manufacturing, with none of
these groups working together to coordinate transportation activities. This largely occurred
because organizations administered transportation processes departmentally and by LOB, and
departmental/LOB politics were often barriers to adopting common transportation management
processes, making it impossible to provide visibility across the organization to all transportation
requirements. However, the growing cost of transportation is forcing organizations to break down
functional barriers, and shippers are increasingly implementing transportation processes and
TMSs that span functional, LOB and geographical domains. Large, geographically spread-out
enterprises with multiple LOBs have significant opportunity to exploit common transportation
processes and systems by creating a shared-service organization empowered to standardize
transportation processes and systems across the organization. Additional opportunities for cost
reductions and process improvements exist if transportation is managed across functions, LOBs
and geographies. Innovative enterprises are beginning to structure transportation processes as a
global shared service, managing the "multis" (that is, multiple modes, businesses, carriers,
geographies, inbound transports and outbound transports) on a common TMS platform. These
companies believe that coordinating transportation activities across multiple dimensions will allow
them to reduce more costs and provide better overall service to business and trading partners.
Action Item(s): Companies that have transportation processes distributed and operating
autonomously across functional domains, LOBs or geographies should consider standardizing
and governing transportation processes as a holistic venture. The largest freight organizations
should consider taking process standardization further by implementing a global shared-service
structure to design, manage and govern transportation processes.

1.2 Inbound Delivery Management

Supply chain organizations have invested heavily in their outbound supply chains; however, most
have not been as rigorous or invested as heavily in their inbound supply chains, although a
significant percentage of total logistics costs is in inbound logistics. Most SCM organizations have
taken a piecemeal approach to fixing nagging problems in their inbound supply chain, such as
implementing advance shipping notification (ASN), so that they have some visibility to inbound
shipments, but few have taken a holistic approach to automating the inbound supply chain. For
many companies, given the level of supply chain outsourcing/offshoring, there is all the more
need to improve the effectiveness of the inbound supply chain because lead times and variability
have increased significantly. Leading-edge SCM organizations have turned their focus to the
inbound supply chain, and are working with their sourcing and procurement groups, suppliers,
and logistics partners to build out a more robust and complete set of processes to manage
inbound shipments.
Because most activities that happen prior to receiving occur outside the enterprise, the inbound
supply chain requires a multienterprise process paradigm in which participants, activities and
steps are modeled and controlled across organizational boundaries. Collaboration with trading
partners is imperative, and new technologies, often provided as software as a service, are

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© 2010 Gartner, Inc. and/or its Affiliates. All Rights Reserved.
increasingly needed to support the multienterprise nature of inbound supply chain processes.
International supply chains are the most-complex inbound environments, and require specialized
tools that allow multiple parties (such as suppliers, carriers, freight forwarders, customs brokers
and governments) to be accommodated in process and information flow designs, as well as in
process delivery. Mandates like the recently enacted U.S. Customs 10+2 Program and
forthcoming European customs changes are making improved inbound supply chain process
support imperative.
Action Item(s): Adopt a multienterprise flow paradigm to map inbound SCM processes.
Understand all the constituencies that participate in the inbound supply chain, and the roles and
information requirements of each. Develop a collaboration strategy to identify who to work with
and the requirements of each participant. Once the inbound processes are understood, consider
multienterprise solutions that can be used to implement the inbound process model.

1.3 Flow Management

Enterprises with superior end-to-end supply chain throughput, often measured by cash-to-cash
cycle time, outperform their competitors. The barrier to achieving world-class throughput
continues to be that most SCM organizations are incapable of tightly synchronizing supply and
demand, and goods often sit idle at various points in the supply chain. Leading-edge SCM
organizations are challenging the notion of a warehouse as a building where vast amounts of
inventory are stored, instead using warehouses simply as "flow through" points with as close to
zero idle inventory as possible. The rudiments of flow, typically called "cross-docking," are not
new in warehousing and WMS applications; however, few organizations have been able to
advance this beyond opportunistically moving goods from the receiving dock to the shipping dock
when there just happens to be a truck waiting for the goods that just arrived.
Flow management goes further, and uses technology to model processes that look backward and
forward across the extended supply chain to proactively synchronize supply and demand. For
example, a ship that has been sailing for 14 days might be arriving in a port with five containers of
goods, and, while on the water, conditions changed, suggesting that where the goods in those
containers go next needs to change as well. In traditional environments, there would be no
visibility until the goods arrived at a specific distribution center; even then, unless the situation
was dire, it would be unlikely that the goods could be automatically cross-docked. Additionally, it
could be necessary to replan to see where the goods would need to go, indicating that the
convergence of SCE and supply chain planning is also a requirement. An effective flow strategy
monitors the goods and changes in demand, and might suggest that, immediately on arrival, the
containers be moved to a deconsolidation point, from which goods would be redirected to new
locations based on current needs.
Action Item(s): Organizations that have mature, facility-based, cross-docking processes, and find
that these processes are not providing the needed throughput, should begin considering
supply/demand synchronization through flow strategies.

1.4 Labor/Resource Management

Traditionally, SCE organizations focused primarily on low-level task execution, Because of this,
many warehouses remain fairly chaotic and reactive. Consequently, work is not proactively
managed for throughput, efficiency and high performance, and SCM organizations lose sight of
higher-level goals and strategies. Leading SCE organizations are investing in modeling
processes around maximizing the performance and use of SCE resources, including labor,
equipment and, where needed, automation. More emphasis is being placed on effective, goal-
driven, resource planning and decision making that could guide individual tasks and activities. A
better understanding of the processes and resource demands and constraints will allow SCE

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© 2010 Gartner, Inc. and/or its Affiliates. All Rights Reserved.
organizations to drive improved throughput, while ensuring that they achieve high levels of
service. Additionally, the information derived from this effort will provide the information needed to
drive continuous improvement initiatives.
Labor management systems (LMSs) used in conjunction with WMSs are not new, but have
traditionally been limited to large, complex warehouse environments with hundreds of warehouse
workers. A barrier to traditional labor management solutions was that the time and effort it took to
implement and maintain these solutions required a sizable workforce to justify investment in the
LMS solution. The availability of commercial systems and packaged engineered standards has
improved the value proposition of these solutions, and, as vendors have added more resource
types and constraints, the value has improved such that the justification threshold is lower.
Action Item(s): SCE organizations must move to a top-down, goal-driven approach to managing
resources for maximum throughput, versus the traditional bottom-up task- and activity-driven
chaos pervasive in many SCE organizations.

1.5 GTM
Supply chain globalization continues unabated, yet few SCM organizations have focused on their
GTM processes for numerous reasons, most notably the prevalence of outsourcing global trade
to third-party logistics organizations, freight forwarders and customs brokers. Globalization
necessitates redesigns of extended GTM process and activity flows to allow for greater control,
efficiency and effectiveness of cross-border trade. Companies face numerous challenges as they
navigate the complex regulatory, financial and logistics issues created from international trade.
Companies must assess their current capabilities, application portfolios, and global trade vision
and strategies to develop the tactics they employ for their global operations.
To begin, they must understand how global trade effects and changes their business processes
and the activities that support those business processes, and how global trade will evolve. For
example, a seemingly simple buying process becomes significantly more complex when the
supplier is located in a foreign country, because specific rules govern international transactions,
more parties are involved with the transaction, and the terms and conditions of trade can change
dramatically. As companies develop a better understanding of their GTM process requirements,
they can subsequently focus on internal process changes, policies, procedures and process
governance changes in anticipation of future strategies. Many companies that have deep process
expertise in domestic supply chains lack expertise in international trade processes, and need to
start mapping these to gain insight. For example government mandates like the U.S. Customs
10+2 Program and changes to European Union customs rules demand that organizations be able
to supply very detailed data about imported goods, which requires them to fully understand the
physical and information flows related to those imported goods, starting from the specific source
of production and extending across all parties that touch the goods in transit.
Action Item(s): Even if organizations choose to outsource GTM activities, they should begin
mapping GTM processes to understand this area better. Organizations should use domestic
processes as guideposts, but they must ensure that they map the GTM processes independently,
and that they use the domestic processes only as a means to highlight process differences. By
comparing the processes, organizations should identify critical differences that demand resolution
before moving forward.

1.6 Returns Management/Reverse Logistics

The vast majority of SCM process design and related IT investment has gone to the forward
supply chain, and minimal, if any, investment has been earmarked to address the growing needs
of the reverse supply chain. Returns are an expensive (4% to 5% of total logistics costs, or as
much as 10% to 20% of operational costs for some industries, such as high tech or retail),

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© 2010 Gartner, Inc. and/or its Affiliates. All Rights Reserved.
resource-intensive and increasingly valuable aspect of SCM. For example, in some industries
(such as retail and high tech), returns are a significant issue, and opportunity for investment.
Effectively managing the reverse logistics process will reduce the cost of returns and have a
positive impact on customer satisfaction.
Reverse logistics is not a mirror image of the forward supply chain, so companies must develop
unique processes to support returns. Companies must first model the authorization process that
determines what can and cannot be returned, for what reasons, and who needs to participate in
the authorization process. Next, the organization must model the physical (disposition) process,
which determines the best path for goods to follow when returning. For example, for damaged
goods there might be one path to a reclamation center, while unopened goods return to a
finished-goods warehouse. Next, the organization needs to understand the financial process. For
organizations in regulated industries, risk management should also be addressed through
additional process flows, to ensure that returns comply with factors such as trade, environmental,
drug or food protection mandates. At its most basic level, this would be processing a credit, but
this should also take into account the financial implications of individual returns and the financial
metrics of the aggregate return process. By building a robust return management process, SCM
organizations can improve the efficiency of handling returns, remove wasted costs, and ensure
that customers are serviced in a timely, accurate and fair fashion.
Action Item(s): Companies in industries with a high percentage of returned goods should focus
process improvement efforts on reverse logistics. For complex environments, they should
consider specialized return management applications that provide robust authorization,
dispositioning and financial capabilities.

RECOMMENDED READING
"A Roundup of Supply Chain Planning Research"
"Supply Chain Execution Convergence: Delivering on the End-to-End Process Promise"
"Manhattan Associates Underscores Importance of Focusing on Execution and Incremental
Investment in Current Economic Climate at Momentum 2009"
"Key Issues for SCM, 2009"
"Toolkit Best Practice: Implementing Sales and Operations Planning"
"Toolkit: Process Best Practices for Implementing Sales and Operations Planning"
"Toolkit Best Practices: Checklist for Issues to Consider in VMI or Supply Chain Collaboration
Projects"
"Toolkit: Best Practices for Model Maintenance and Improvement in a Supply Chain Planning
Implementation"
"Case Study: Supply Chain Planning Implementation at Canon Europe-Consumer Imaging
Business"
"Toolkit: Best Practices for Model Development in a Supply Chain Planning Project"
"Supply Chain Management Vendor Guide, 2008"
"Supply Chain Planning Market Is Bifurcating Into Process Automation and Process Innovation
Markets"
"Supply Chain Management Glossary 2.0, 2008"

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© 2010 Gartner, Inc. and/or its Affiliates. All Rights Reserved.
"Supply Chain Planning Market: Process Automation Characteristics"
"Hype Cycle for Supply Chain Management, 2008"
"Hype Cycle for Business Intelligence and Performance Management, 2008"
"Gartner's SCM Scenario: Post-Lean Supply Chain, 2008 and Beyond"
"Use the Gartner SCM Maturity Model to Show the Business Benefits of SCM Investments"
"Toolkit: Understand Your Supply Chain's Complexity to Reduce Business Costs and Mitigate
Risk"
"Assessing the Maturity of Your Sales and Operations Planning Process"
"Leverage Your S&OP Process When Reducing Your Supply Chain Costs"
"Global Economic Crisis Demands New Strategies for Managing Global Supply Chains"
"Cost Cutting in Supply Chain Management Applications"

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